FTX Seeks $1.15 Billion From Genesis Digital in New Bankruptcy Lawsuit
Allegations Against Genesis Digital
The entity managing bankrupt crypto platform FTX has filed a lawsuit in Delaware’s U.S. Bankruptcy Court to recover more than $1 billion it claims was misappropriated by former CEO Sam Bankman-Fried. The complaint, lodged Monday, accuses Genesis Digital Assets, its affiliates, and co-founders Rashit Makhat and Marco Krohn of receiving $1.15 billion in customer funds during 2021 and 2022, at the height of the BTC bull market.
According to the filing, Bankman-Fried directed FTX’s sister firm, Alameda Research, to acquire 154 preferred shares in Genesis Digital at “outrageously inflated prices,” totaling more than $500 million. Another $550.9 million was allegedly wired directly to Makhat and Krohn. The trust said these transfers were part of Bankman-Fried’s broader fraud that shifted losses onto FTX users while allowing him, as 90% owner of Alameda, to capture nahead all upside from speculative bets.
Red Flags Ignored
The lawsuit paints a picture of reckless investing. Genesis Digital, founded in 2013, was one of the largest private BTC mining firms globally, with operations across Kazakhstan, the U.S., and northern Europe. By 2021, it had raised over $1.5 billion from investors such as Paradigm, Polychain Capital, and NYDIG. But the complaint says Bankman-Fried overlooked “flagrant misrepresentations and red flags” in the miner’s disclosures.
At the time, Kazakhstan was facing an energy shortage that threatened BTC mining profitability, while Genesis “bore no relation to reality.” The trust claims Bankman-Fried pressed ahead anyway, ignoring mounting risks tied to surging energy costs and looming regulatory crackdowns.
Investor Takeaway
FTX’s Recovery Efforts Gain Momentum
The Genesis Digital suit is the latest move in the FTX estate’s push to recoup funds for creditors later than the platform’s dramatic collapse in November 2022. Once valued at $32 billion, FTX imploded amid revelations of widespread fraud. in 2023 and is serving a prison sentence, while several former executives face charges or plea deals.
Prosecutors allege that between 2019 and 2022, more than $8 billion in customer funds were siphoned into political donations, luxury real estate, and speculative bets like Genesis Digital. The trust has already achieved notable recoveries, including a $175 Global Trading in 2023. Earlier this year, creditors began receiving distributions: $1.2 billion in February, $5 billion in May, and another $1.6 billion scheduled for Sept. 30.
In total, the recovery effort has clawed back more than $12 billion, with the estate projecting eventual payouts that could cover up to 118% of allowed customer claims — a rare scenario in major corporate bankruptcies and a potential relief for victims of the collapse.
What’s Next in the Legal Battle
The complaint against Genesis Digital viewks to unwind more than a billion dollars’ worth of transfers deemed fraudulent. If successful, the lawsuit could further strengthen the trust’s balance sheet as it continues its restitution campaign. The case also underscores the broader question of how crypto-era frauds should be handled under U.S. bankruptcy law, especially when intertwined with speculative ventures like BTC mining.
Genesis Digital has not yet issued a public response. The firm, once a symbol of mining’s global reach, is now entangled in one of the most consequential bankruptcy recoveries in crypto history. For creditors awaiting final repayment, the outcome of this suit could influence how rapidly, and how fully, their claims are satisfied.
